Discussion on outstanding issues

Clause 35(4)

2. Members expressed different views on the Administrations proposal to maintain criminal sanctions against parallel importation of copyright articles during the first 12 months after publication or release of the work anywhere in the world. Members of the Democratic Party supported the Administrations proposal from consumers perspective. Other members appreciated the concerns and operational needs of the film industry and suggested extending the protection period to 18 months. There were also members who suggested two years.

3. In response, the Deputy Secretary for Trade and Industry (DS/T&I) reiterated the rationale for setting the criminal sanction period at 12 months as follows -

The window system of the film industry showed that the most critical period of economic exploitation of a copyright work was usually the first 12 months after the work was published or released in the market. In any event, civil remedies were available throughout the copyright term.

The length of the criminal sanction period should be determined on the basis of general trade practices, not commercial considerations or specific marketing strategies. One year should be long enough to allow copyright owners of local films to exploit their rights in Hong Kong and protect them against flow-back of products after first release elsewhere. As for exclusive licensees of foreign films, it should be noted that the negotiation of licence agreements was essentially a commercial activity. Whether a person considered it economically viable to enter into a licence agreement was a commercial decision.

From consumers perspective, the 12-month provision of criminal sanctions against parallel importation would encourage both the copyright owner and the exclusive licensee to make available their products in the market earlier in order to satisfy demands and take advantage of enhanced copyright protection.

4. The Chairman opined that compared with the original proposal to decriminalise parallel importation, the present proposal was already a compromise on the part of the Administration. She referred members to the letter from the Consumer Council (tabled at the meeting on 30 May 1997 and circulated to members vide LegCo Paper No. CB(1)1754/96-97(02)), which called for total deregulation of parallel imports. She stressed the need to balance the interests of various parties.

5. The Administration noted the divergent view of members and proposed to extend the period of criminal sanctions to 18 months and amend clause 35(4) accordingly. The Bills Committee noted the Administrations proposal.

Addition of clause 35(4A)

6. Members noted the CSA to add clause 35(4A) to clarify non-application of customs border measures to parallel imports.

Addition of clauses 35A(1) and (2)

7, The Deputy Director of Intellectual Property (DD of IP) advised that in response to members requests at the meeting on 30 May 1997, clauses 35A(1) and (2) would be added to clarify the circumstances under which a defendant might claim that he had no reason to believe that he was dealing with infringing copies.

8. The Consultant (Legal Service Division) (CONS(LS)) referred members to clause 35A(2)(c), which provided that in determining whether a defendant had reason to believe that he was dealing with infringing copies, the court should have regard to whether he had complied with any code of practice that might exist in respect of the supply of that category of work. He alerted members to the possibility of referring to a code of practice which was developed unilaterally by one party. Consideration of such a code of practice might be unfair to the other party.

9. The Administration acknowledged the point but said that a code of practice was only one of the factors to which the court should have regard and the factors specified in the clause were not exhaustive.

10. Some members opined that removal of reference to a code of practice might run the risk of its being rejected as relevant material. Members agreed to retain the subclause as drafted.

Addition of clauses 35A(3) and (4)

11. Members noted the proposed deletion of the word "also" before "a defence" in clause 35A(3).

12. Miss Margaret NG opined that the expression "acted unconscionably" in clause 35A(4) might give rise to problems as the court would be required to examine trade practices and contractual terms in determining whether an act was unconscionable. Mr Ronald ARCULLI echoed this view and considered it inappropriate to apply the concept of "unconscionable act" in contract laws to copyright laws. In response, D of IP stressed that the concept had been introduced in response to requests of deputations. It was inherent in copyright law to balance the interests of relevant parties. As this clause attempted to provide for a defence, it was important for the court to decide in every case whether the right owner had actually operated unconscionably.

13. CONS(LS) opined that it was appropriate to refer to the Unconscionable Contracts Ordinance (Cap. 458) in drafting the provision to a certain extent. However, the concept of consumer interests in contract laws should not be assimilated entirely in copyright laws.

14. The Chairman referred members to the submission from the Motion Picture Association (MPA) (tabled at the meeting and circulated to members vide LegCo Paper No. CB(1)1780/96-97) and invited the Administration to respond to MPAs suggestion that the word "unreasonably" before "prejudice" in clause 35A(4) should be deleted. In response, D of IP pointed out that the wording was an exact quotation from the Agreement on Trade-Related Aspects of Intellectual Property Rights of the World Trade Organisation. The Administration considered it undesirable to delete the word "unreasonably" which would be a departure from the Agreement.

15. The Chairman drew members attention to the submission from Robert W H Wang & Co. (tabled at the meeting and circulated to members vide LegCo Paper No. CB(1)1780/96-97). HMV proposed to add clause 35A(5) to clarify the meaning of "unreasonable grounds" and "unreasonable terms". Members of the Democratic Party supported inclusion of subclause (5). Some members, whilst recognizing the need for subclause (5), considered it contained excessive operational details. There were also members who objected to including the subclause on the ground that this would create uncertainty.

16. D of IP advised that inclusion of subclause (5) would require the court to consider the wish of consumers. Whilst the Administration was as concerned as members about consumer interests, members should appreciate the fact that the Bill was a copyright law, not a consumer protection law. Moreover, inclusion of subclause (5) might affect the fragile consensus reached among the parties on parallel importation. Members noted the Administrations view.

Clause 110 (1B)

17. Members had different views on subclause (a). Some were concerned about uncertainity created by the expression "the copyright owner cannot be reached"; others questioned the likelihood that the copyright owners "identity or whereabouts" was "unknown" to the exclusive licensee. There were also members who opined that subclause (a) provided some pointers to the court on the circumstances under which waiver of joint action was justified and that this subclause should be considered in conjunction with subclause (b). Since most members had reservations about subclause (a), the Bills Committee proposed and the Administration agreed to delete it, leaving it to the court to decide on the meaning of exceptional circumstances. Consequential to this amendment, the Administration would delete the word "other" before "exceptional circumstances" in subclause (b).

Addition of clause 182A

18. Miss Margaret NG had reservations about clause 182A which provided for remedies for groundless threats for civil proceedings against alleged parallel importation. The Administration explained that the new provision had been introduced to address concerns raised during the consultation exercise. Singapore and Australia had similar provisions and the new clause was modelled on the Australian version. A similar provision had also been incorporated in the newly enacted Patents Ordinance and Registered Designs Ordinance.

Reason to believe

19. Members deliberated on KPSs letter dated 2 June (tabled at the meeting and circulated to members vide LegCo Paper No. CB(1)1780/96-97). KPS considered the Administrations CSAs to clauses 35 and 115 in relation to "reason to believe" unclear. Some members opined that clause 115(5B) should be expanded to incorporate certain circumstances highlighted in KPSs letter. In response, DS/T&I pointed out that the Administration had already considered KPSs comments but maintained that there was no need to exhaust the details. Members noted the Administrations view. The Administration noted CONS(LS)s comment that the expression "but not limiting to" in clause 115(5B) should be "including but not limiting to" and that the word "limited" should be "limiting" in this clause and clause 35A(2).

Joint submission from ATV, Cable TV, TVB and Star TV

20. The Chairman drew members attention to the disappointment of broadcasters over certain CSAs proposed by the Administration. Members noted the joint submission from ATV, Cable TV, TVB and Star TV (tabled at the meeting and circulated to members vide LegCo Paper No. CB(1)1780/96-97) and the Administrations response to the views of broadcasters which had been considered at previous meetings of the Bills Committee.

Transitional provisions

21. Members agreed that CONS(LS) would discuss with the Administration concerning the interpretation of transitional provisions in paragraph 12 of Schedule 2 and would alert members to any amendments considered necessary.

22. Members noted that the Chinese version of the CSAs would be ready by 13 June 1997. They agreed to delegate scrutiny of the Chinese text to Assistant Legal Adviser (Authentication Project)2.

23. DS/T&I thanked members for their valuable input in the course of scrutiny of the Bill. The Chairman, on behalf of the Bills Committee, commended the Administration for its hard work and open-mindedness.